Independent doctors’ offices are disappearing as more physicians work for hospitals and companies

The days of the stalwart solo physician, hanging out a shingle and seeing patients as he or she sees fit, are rapidly drawing to a close. Consulting firm Avalere Health reports that almost 70% of physicians in the United States now work as employees of a hospital, health system, or private corporation. That’s a 12% increase over just two years ago, and is likely to accelerate after the COVID-19 pandemic.

The report is “a stunning document” that shows just how much the profession of medicine is changing, said Richard Baron, president of the American Board of Internal Medicine, the Philadelphia-based group that certifies the expertise of internists.

What do the changes mean for practicing physicians?

It suits some quite well, such as Kevin Zakrzewski, an internist at Abington-Jefferson Health, who has practiced as an employee for his entire 22-year career. Employment means he “can move away from the business side” and focus on caring for patients. “The HR issues alone in running a private practice are immense,” he said.

Besides, he can take vacations without worrying about the hit to practice revenue.

New Hampshire orthopedist Charles Blitzer and his seven partners would agree. They sold their practice in 2018 to Wentworth-Douglas Hospital, an affiliate of Massachusetts General Hospital in Boston.

Running an independent medical practice has come to require “high-level administrative skills” that Blitzer and his partners “had no desire to acquire.”

“I went to medical school to practice clinical medicine,” not to be entrepreneurial, he said.

There are trade-offs, however. By turning over the business side of their practice to a large organization, Blitzer and his colleagues “are not nearly as nimble as they were” when it comes to such functions as purchasing. “To replace an ultrasound machine in the office, we have to go through a complex process.”

But Blitzer feels that “overall, work life has not profoundly changed.”

Others are less sanguine. Steven Fassler, a colorectal surgeon based at Abington, has chosen to keep his practice independent. Although Fassler has staff privileges at the hospital, performs surgery and admits patients there, he does so through his own practice, which is like a small business. It bills and collects for his services and handles administrative aspects of his practice. “I don’t like letting people tell me what to do,” he said. He fears that “the force of a corporate structure alters the culture of what you want to do.”

Fassler is especially concerned that a corporate boss could make doctors pay greater heed to their employers and not their patients. The change can occur in little pieces, and “all of a sudden, you’re working for the dark side.”

Economic forces are making it increasingly difficult for physicians to remain in private practice. Among the first to feel the effect were older physicians contemplating retirement who have found the younger generation less willing to take on the risks and demands of independent practice and more receptive to the security of employment.

Other, more subtle financial pressures include cuts to Medicare payments for imaging tests performed by cardiologists, orthopedists, and oncologists in their offices that make their practices less lucrative.

And many payers, including Medicare and some private insurers, are increasingly basing reimbursement on value-based purchasing, which compares the amount paid for services with their clinical value. Administering these arrangements piles on yet more practice overhead expense.

Other administrative concerns, such as the cost of malpractice insurance, have been driving physicians to employment for some time. But they do not appear to account for the recent acceleration of the trend, experts said.

As significant as they are, these pressures pale in comparison with the administrative burden of installing and operating electronic medical records systems, commonly known as EMRs. A system can cost $15,000 to $70,000 per provider, and installing it can disrupt a practice’s workflow and revenue while physicians and staff learn how to use it.

Yet medical practices have little choice about incurring the expense. A federal law enacted in 2009 penalizes physicians who do not engage in “meaningful use” of EMRs by reducing their Medicare reimbursement.

It is also increasingly difficult to practice without an EMR, which enables physicians to share information instantaneously with colleagues. Blitzer described an experience in which he diagnosed a patient with a tumor on a Friday afternoon and confirmed that the patient had visited an oncologist on Monday morning by seeing the oncologist’s notes in the system.

Larger systems can also invest in ways to make EMRs easier to use. For Blitzer and Zakrzewski that has meant funding to hire scribes, who join physicians and patients in the exam room to document the encounter in the EMR, letting the physician focus exclusively on the patient.

As if these disadvantages for independent practices were not enough, the COVID-19 pandemic dealt them another huge blow as patient volumes and revenues shrank while medical supply expenses grew. In the face of these pressures, Zakrzewski saw some colleagues in smaller practices go without a paycheck for several months, a predicament that he and his employed colleagues were able to avoid.

Consulting firm McKinsey & Company predicts that COVID-19 will lead to more practice acquisitions, with the pace accelerating in 2021 as smaller hospitals and independent physician groups seek partners to cushion the continuing financial fallout.

For hospitals, owning physician practices offers protection against a rising tide of threats in a rapidly changing health care environment. Some, especially in rural areas, are trying to ensure that a base of primary care remains in their community. Others see the chance to steer physicians away from competing providers. Owning physician practices can provide protection against laws that restrict paying financial incentives for referrals.

For still others, it is a way to maximize reimbursement under Medicare’s arcane and changing billing rules.

And of paramount importance to many hospitals, consolidation is a way to leverage a larger size in bargaining with insurance companies.

The recent wave of practice acquisitions began about two years ago, and it could turn out to alter the entire health-care landscape. It’s now not just hospitals that are snapping up practices. The share of acquisitions by private equity firms rose from 35% in 2016 to 77% in 2019. In 2018, they spent $32.9 billion on 647 health-care transactions, twice the number as in 2014.

Insurance companies are also getting into the act. UnitedHealth Group’s Optum division employs more than 53,000 primary-care and specialty physicians in several states. It recently acquired Surgical Care Affiliates, a company that owns or operates 190 ambulatory surgery centers and surgical hospitals.

Even some insurers that do not own practices are welcoming the trend. For Donald Liss, chief medical officer for Horizon Blue Cross in New Jersey, negotiating with a single party is easier than with a host of smaller ones. The larger patient bases of bigger organizations also make it easier to try out “more creative and innovative arrangements,” like paying for services based on their clinical value.

Where does all this leave patients?

Baron sees better care from more effective use of information systems. “Patients absolutely benefit when their clinicians have more information about them.”

And if you peel away the technology, “clinical medicine is still clinical medicine,” Liss observed. “It is still about an intense relationship between a physician and a patient.”

Robert I. Field holds a joint appointment as professor of law and professor of health management and policy at Drexel University. He is a member of the Inquirer’s Health Advisory Panel and a frequent contributor on health policy topics.